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There’s still a way to go before used car prices come back down to earth.
Whereas Prices were 8.8% lower in December Up from a year ago, consumers continue to pay more for used cars if normal depreciation expectations are in play, according to car-shopping app CoPilot, which tracks those price premiums. monthly report,
According to CoPilot, the average price for a used car last month was $30,899. This amount is $7,146 (or 30%) more than if the estimated depreciation forecast were correct. However, prices are going in the right direction for consumers: Six months ago, The app estimated car buyers were paying about $10,000 more than “normal”.
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“While the average price premium is still at 30%, US used car prices still have a long way to go before they return to normal,” CoPilot reports.
Demand in the used car market skyrocketed during the pandemic as supply chain issues hampered automakers’ ability to produce new vehicles. The situation is now easing with a marginal improvement in dealer inventory as rising interest rates put pressure on Affordability, According to estimates by JD Power and LMC Automotive, the average price of a new car is $46,382.
The average interest rate on a used car loan is 10.25%
Yet turning to a used car usually does not yield a better rate when it comes to financing. According to Edmunds, the average interest rate on a used car loan was 10.25% in December, compared to 6.68% for financing a new vehicle. That compared to 7.4% and 4.1%, respectively, a year earlier.
In addition, the rate you pay is partly based on your credit score – The higher that three-digit number, the lower the rate you may qualify for.
And, of course, the price depends on the specifics of the car itself.
Nearly new cars are $9,606 above ‘normal’
According to the CoPilot Index, by age, the median listing price for nearly new vehicles (1 to 3 years old) is $40,273, which is $9,606 or 31% higher than the estimated typical amount of $30,667.
In the 4- to 7-year category, the median price is $29,400, an amount that is $6,731, or 30%, higher than the “typical” price of $22,669. Vehicles 8 to 13 years old come in with an average price of $18,018, or $4,621 more (about 35%) than the previously forecast $13,397.
Used cars with biggest price drop
The prices of some cars have dropped more than others. According to iSeeCars, the chart below shows the 10 used cars whose prices fell the most in two months (September to December).
Meanwhile, the pressure on new car production during the last few years could act as a constraint in the used car market in the coming times.
“The lack of inventory of new cars in 2021 and 2022 means there are significantly fewer [of those] “The model-year vehicles on the road today are what will become the used cars of the future,” said Joseph Yoon, consumer insights analyst at Edmunds.
Additionally, Yoon said, many 1- to 3-year-old cars that end up at dealerships for sale are leased cars that were returned, and the number of customers who have leased their cars is more than two years old. fell to 16% in December from 29% earlier. ,
“The rental fleet also suffered dramatically from the new vehicle shortage, leaving a reliable stream of late-model used vehicles for consumers to choose from,” Yoon said.